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The effects of migration and remittances on development and capital in Caribbean Small Island Developing States

Zouhair Ait Benhamou () and Lesly Cassin ()

No 2018-41, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper puts forward a modified OLG framework for high migration countries such as Caribbean islands, to link economic growth and demographic features. Our theoretical model captures the potential effects of migration on the households' choices in terms of savings, fertility and education, and thus on the accumulation of human and physical capital. Through a numerical analysis we study specifically five countries. We find that households in Jamaica, Haiti and Dominican Republic invest more in education for future generations and increase their fertility rate. Thus due to migration, their economic growth is driven by accumulation of efficient units of labor. For Barbados or Trinidad and Tobago, the benefits from education are dwarfed respectively by a low migration premium or a low level of remittances. Their economic growth is therefore driven by a high accumulation of physical capital. Second, we introduce frictions on the capital market in order to account for the imperfections in the interest rate adjustments to the marginal productivity of capital. For the studied islands, physical capital accumulation on the one hand and economic growth on the other hand show trade-offs between short-run and long-run if the frictions are reduced.

Keywords: Migration; Capital Markets; Overlapping Generations Model; Caribbean; Small Island Developing States (search for similar items in EconPapers)
JEL-codes: F63 F24 J24 J11 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2018
New Economics Papers: this item is included in nep-dge, nep-gro and nep-mig
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Handle: RePEc:drm:wpaper:2018-41